The MSCI Asia Pacific Index dropped 0.4 percent to 131.88
as of 8:18 p.m. in Tokyo, erasing earlier gains of 0.3 percent.
The gauge, which is priced in dollars, extended its decline as
the yen weakened, reducing the value of Japanese companies in
the measure. About 10 shares gained for every nine that fell on
the gauge as benchmarks across the region increased.

“We will see continuous volatility amid concern the
Federal Reserve will soon taper stimulus,” said Daphne Roth,
Singapore-based head of Asia equity research at ABN Amro Private
Bank, which oversees about $207 billion. “A withdrawal would be
an issue for companies seeking financing. Liquidity is quite
tight in China. The Chinese government isn’t bent on growing
credit. It’s quite tough as they attempt to reduce the housing
bubble and excess capacity in other industries.”

About $2.7 trillion has been erased from global markets
since Fed Chairman Ben S. Bernanke said May 22 U.S. policy
makers could scale back stimulus efforts if the employment
outlook shows “sustainable improvement.”

Shares on the MSCI Asia Pacific Index traded at 12.7 times
estimated earnings yesterday, compared with multiples of 14.8
for the Standard & Poor’s 500 Index and 13 for the Stoxx Europe
600 Index, according to data compiled by Bloomberg.

Futures on the Standard & Poor’s 500 Index added 0.2
percent today. The gauge climbed 0.8 percent yesterday as
investors watched economic reports for clues to whether the
economy is strong enough to allow the Fed to scale back its $85
billion in monthly bond buying. Confidence among U.S.
homebuilders surged in June to the highest level seven years.

‘Worst Case’

“I don’t think the volatility will go away in a matter of
days or in the worst case a few weeks,” Mikio Kumada, Hong
Kong-based global strategist for LGT Capital Management, which
oversees more than 25 billion, told Bloomberg Television. “The
case for a premature tightening is not very strong. It’s about
reminding the market: Don’t get too exuberant. There’s a punch
bowl out there and maybe we will have to withdraw it
eventually.”

Japanese exporters advanced as the yen fell as much as 0.8
percent against the dollar, heading for its second day of
decline. A weaker yen boost the value of overseas income at
carmakers and electronics manufacturers when repatriated.

Sony climbed 4.4 percent to 2,036 yen in Tokyo. Third
Point, which is proposing to spin off the company’s
entertainment business, now holds 70 million Sony shares,
according to a June 17 letter from the investor to Chief
Executive Kazuo Hirai obtained by Bloomberg.

Hyundai Motor Co., South Korea’s biggest carmaker, advanced
3.8 percent to 204,500 won in Seoul. The company may report
better-than-expected sales in the second quarter as it has
stepped up production to make up for a drop in output in May
when workers boycotted weekend shifts, said Lee Sang Hyun, an
analyst at NH Investment & Securities Co.

Chinese property developers declined as home prices rose at
the fastest pace in more than two years in most cities, defying
tougher government curbs and constraining the ability of policy
makers to ease credit in response to weakening economic growth.

Chinese Dilemma

“The government is in a dilemma right now,” Zhang Zhiwei,
Hong Kong-based chief China economist at Nomura Holdings Inc.,
said in a telephone interview today. “It’s difficult for China
to tighten the property market while it also needs to bolster
the economy, which has a strong reliance on property.”

STX Pan Ocean slumped 15 percent to 2,185 won in Seoul, the
lowest close since its listing in September 2007, after a court
accepted its application to seek protection. That means
investors will see their shareholding written down and creditors
will swap debt for equity as part of any restructuring, said Cho Byoung Hee, an analyst at Kiwoom Securities Co. in Seoul.